In light of yesterday’s panic spreading across the Russian financial markets and the rouble dropping by as much as 19%, EXANTE spoke a well-renowned trader Grigoriy Isaev to comment on the latest events.
What is your view on the Russian Central Banks’s current policy?
If the RCB’s goal was to ensure stability of the financial system, then they have failed it completely. That is why my attitude towards their actions is highly negative – they are implementing incorrect actions with a large delay. For example, raising interest rates will have a strong negative impact on stocks, bonds and the Russian economy in general.
I honestly do not understand why it is not possible to utilize 10-20 billion out of the 400 billion of the gold reserves, which would be sufficient to prevent deflation. Moreover, I do not understand why the Central bank and the government continue to repeat that they are not going to use administrative regulation means. To my mind that is the only chance to stabilize the current situation.
Do you believe that if the government does not implement tough measures, then the rouble devaluation will continue?
The problem lies in the fact that the panic might spread in the financial sector. Banks who have a large portion of bonds in their portfolios are already suffer from significant losses. People are selling all possible liquid assets that they have except for currencies. If the Central bank doesn't do what is necessary to stop the plummet of the rouble by means of administrative actions, then many banks, including those in the top-20, will simply crash.
Let us consider two scenarios. What will happen in case the Central Bank manages to control the situation in the near future, and what can we anticipate if it does not?
If the Central bank reacts to the changes within the needed timeframe, then the situation may still stabilize, even though the Russian stock market and the national currency have endured massive losses. If the RCB is not able to control the current state, then there will be a collapse. It is worthwhile noting that the Russian economy initially was oriented towards imports and funding from the West. Therefore, the economy will undergo a significant shock in case the imports are cut by 50%. At the moment many businesses continue to manage with their old stocks, but the situation can deteriorate vastly in Q1 of the following year.
EXANTE continues to monitor the latest developments in the financial markets. For more expert commentaries keep reading our news section. Moreover, we would like to inform you that EXANTE has not discontinued trading the Russian Rouble. In fact, we are ready to offer even more attractive trading conditions, you can get acquainted with them via the following link.